Starting Your Own Firm
Think Before You Demand — Miguel Mendoza v. Reed K. Hamzeh
If the threat of getting in trouble with the State Bar is not enough, maybe the threat of both civil and criminals actions will get attorneys to toe the line.
You know that it is an ethical violation for an attorney to threaten criminal action as a means to extract a civil settlement. For example, California’s Rules of Professional Conduct state that “a member shall not threaten to present criminal, administrative, or disciplinary charges to obtain an advantage in a civil dispute.” (Rule 5-100.)
Then there are the criminal extortion laws:
“Extortion is the obtaining of property from another, with his consent . . . induced by a wrongful use of force or fear. . . .‟ (Pen. Code, § 518.) Fear, for purposes of extortion ‘may be induced by a threat, either: [¶] . . . [¶] 2. To accuse the individual threatened . . . of any crime; or, [¶] 3. To expose, or impute to him . . . any deformity, disgrace or crime[.]’ (Pen. Code, § 519.) ‘Every person who, with intent to extort any money or other property from another, sends or delivers to any person any letter or other writing, whether subscribed or not, expressing or implying, or adapted to imply, any threat such as is specified in Section 519, is punishable in the same manner as if such money or property were actually obtained by means of such threat.’” (Pen. Code, § 523.)
Despite these prohibitions, some attorneys can’t resist throwing a threat of criminal action into their demand letters. They apparently think (if they give it any thought at all) that an express or veiled threat of criminal action will be protected under the litigation privilege, but that is not the case. If you include a demand for money in a letter that threatens to pursue criminal action, you have committed extortion, and as Flatley v. Mauro held, that is not protected speech because criminal acts are not protected.
The most recent example of this was discussed in the just published decision of Miguel Mendoza v. Reed K. Hamzeh. According to the opinion, an attorney named Reed K. Hamzeh was representing a client named Guy Chow, seeking to recover money allegedly owed to Chow by Miguel Mendoza. The dispute concerned Mendoza’s employment as the manager of Chow’s print and copy business. Hamzeh sent a letter to Mendoza’s attorney, which according to the opinion stated:
“As you are aware, I have been retained to represent Media Print & Copy (“Media”). We are in the process of uncovering the substantial fraud, conversion and breaches of contract that your client has committed on my client. . . . To date we have uncovered damages exceeding $75,000, not including interest applied thereto, punitive damages and attorneys‟ fees. If your client does not agree to cooperate with our investigation and provide us with a repayment of such damages caused, we will be forced to proceed with filing a legal action against him, as well as reporting him to the California Attorney General, the Los Angeles District Attorney, the Internal Revenue Service regarding tax fraud, the Better Business Bureau, as well as to customers and vendors with whom he may be perpetrating the same fraud upon [sic].”
The letter goes on to list Mendoza‟s alleged transgressions, including failure to pay Media’s employees, sales taxes and bills.
What followed next was Flatley all over again, with some additional twists. In May 2011, Mendoza responded to the demand letter by filing an action against attorney Hamzeh, asserting causes of action for civil extortion, intentional infliction of emotional distress and unfair business practices. Just as in Flatley, Hamzeh thought his letter was protected under the litigation privilege, and brought an anti-SLAPP motion to strike Mendoza’s complaint. But here, the plaintiff’s counsel had the benefit of the already decided Flatley, and wrote to Hamzeh to say that the anti-SLAPP motion would be frivolous since the facts fell squarely under that decision. Hamzeh decided to go ahead regardless, and after the court denied the motion it awarded attorney fees on the ground that the motion had, indeed, been frivolous. Hamzeh then appealed from the denial of the anti-SLAPP motion, and lost. The action against Hamzeh for civil extortion and the other causes of action will now proceed.
The takeaway from Hamzeh’s experience is that the standard for civil extortion is very low. On appeal, Hamzeh argued that his demand letter was not nearly as egregious as the one utilized in Flatley, which was true, but as the court found, the issue is not how far the letter goes, it is whether it amounts to civil extortion as a matter of law. As you can see from the Penal Codes above, that requires only a demand for money in conjunction with a threat to “expose, or impute to him . . . any deformity, disgrace or crime . . . .” That standard is incredibly broad! It doesn’t even matter whether or not a crime occurred that can be properly reported. Further, as I just realized in preparing this article, the threat doesn’t even need to concern criminal conduct; it is enough to threaten “disgrace”. If an attorney wrote a letter suggesting that the defendant should settle to avoid having his family realize what he had done, it appears that would constitute civil extortion.
Bottom line: Limit your demand letters to the merits of the case, and leave out any secondary threats.
Unhappiest Job in America: Associate Attorney
The website CareerBliss.com has compiled a list of the happiest and unhappiest jobs in America, and found that associate attorney is the absolute worst. Based on a survey of 65,000 employees, which examined such factors as relationship with boss, work environment, job resources, compensation, daily tasks and control over work, associate attorney rated just 2.89 out of five points.
“Associate attorneys stated they felt most unhappy with their company culture,” Heidi Golledge, chief executive of Career Bliss said. “In many cases, law firms are conducted in a structured environment that is heavily centered on billable hours. It may take several years for an associate attorney to rise to the rank of partner. People in this position rated the way they work and the rewards they receive lower than any other industry.”
Notice, the conclusion is not that being an attorney is the most miserable job, but rather being an associate attorney. This follows my own experience of hating the practice of law when I worked at a big firm, but loving it when I started my own firm. Notice also that money isn’t everything. Associate attorney was the highest paying job, on average, by a significant margin, but it still came in last. (An associate’s “high” salary is largely illusory, as explained in my article Fun With Numbers.)
So stop being a miserable drone! Pull the plug and start your own firm.
A summary of the findings can be found at Forbes and the chart at CareerBliss.
Damning With Faint Praise – The Ongoing Saga of Sharon Bell v. Igal Feibush
Can’t a guy get a few minutes to enjoy his victory?
As discussed in greater detail here, we forged an important precedent as regards the application of Penal Code § 496(c). Our client loaned the defendant $202,500 that was never repaid, and in addition to suing for breach of contract and fraud, I added a claim for theft under Penal Code § 496(c), which provides for the recovery of treble damages and attorney fees. We prevailed, and the trial court awarded just under $700,000.
Defendant appealed just on the application of the Penal Code, and on January 15, 2013, the Court of Appeal affirmed the judgment and our interpretation of that section, holding that a civil claim for theft can be pursued even if there has been no criminal conviction, and that theft by false pretense qualifies as a theft under section 496(a).
Then before the champagne corks had even returned to earth, I got a letter from counsel for Defendant, sent to me but addressed to my client, with the usual posturing about how the judgment won’t hold up (sort of like the letter that was sent before the appeal to the Court of Appeal):
Your judgment is not settled. Although the Fourth Circuit court of appeal affirmed the judgment, my client is being courted [well that's gotta feel good] by firms willing to take the case up to the Supreme Court [please line up to the left]. Your attorney is very intelligent [please, I'm blushing] and very skilled [oh stop], but so are many other attorneys in California [oh yeah? name five] with a higher amount of appellate experience [I've been doing this for 26 years, so they must be really old], one of which is a well-known appeal lawyer [Vinny Gambini?] who has been brought in by others who have noticed the case and wish to dispute what is considered an abomination of law [well I, wait . . . what now?].
Then came a motion to depublish the opinion of the Court of Appeal. An attorney with no relation to the action or parties filed a letter brief requesting that my hard-earned opinion be depublished, stating that it was neither “fair or soundly reasoned.” Easy there buddy, that’s my reasoning you’re talking about, as well as Judge James Di Cesare (clearly an outstanding legal mind since he agreed with me) and Justices Fybel, Aronson and Presiding Justice O’Leary (ditto).
Well Mr. Not Soundly Reasoned, you concede that victims of theft “indisputably have standing” to bring a civil action under section 496(c), but you assert such action is available only after a defendant has first been criminally convicted for theft. So you agree that the award of treble damages is appropriate (at least under the Legislative intent) where a theft has occurred. If it is appropriate to award treble damages when there has been a theft, how does it become inappropriate if the theft is proven civilly? Why should a victim’s damages turn on whether the police arrest and the District Attorney prosecutes? Where’s the sound reasoning in that?
I’ll let you know if the Supreme Court decides that our verdict was an abomination.
Could life at a big firm ever be this much fun?
[UPDATE:] The Supreme Court apparently determined that our verdict was not an abomination, and on April 10, 2013 not only DENIED the request to depublish the opinion, but on its own motion ruled that it will not review the opinion of the Court of Appeal and, to put a fine point on it, stated that “the matter is now final.” I take that to mean the Supreme Court is saying, “this is the best legal reasoning we have encountered since California became a state, and there is no way we would ever presume to review it”, but I could be reading too much into it. I guess all the appeal attorneys who were courting the defendant will now take their chocolates and flowers and go home.
A Lesson Relearned, and How to Defeat an Ex Parte Application
I hate opposing ex parte applications.
It’s a little better than the bad old days. Ex parte means unilateral. Back in the day, we would go to court with no notice to the other side and obtain ex parte relief, as long as we could explain to the court why the other side should not receive notice. That is still an option, such as when you are seeking to grab an asset and don’t want to tip off the other side, but for the most part you have to give the other side notice.
In my jurisdiction, and I imagine most have similar rules, you must notify the other side of the hearing at least 24 hours in advance. Still, that means that opposition can take months to craft a perfect application with supporting declarations, whereas I get a few hours to prepare an opposition. Our rules also provide that the papers must be served “at the earliest possible opportunity” and I take that to me the moment they are filed with the court, which in most courts is the day before the hearing. Most unscrupulous attorneys ignore this rule, and I am lucky if I get the moving papers before the hearing. I can object to the late service, but at best the matter just gets moved to the next day and my client has to pay for another trip to court.
Even in a perfect world, however, here is how it usually plays out. I get notice of the ex parte application, and receive the moving papers that afternoon for a morning hearing the following day. I then have the rest of the day (and night if necessary) to prepare the opposition, but I can’t possibly get the papers filed before the hearing. (Sometimes if the application is for something generic like a motion to continue trial, I can prepare the opposition without ever seeing the moving papers, but I’m talking about applications supported by declarations, where I need to be able to read and oppose those declarations.)
So, ninety percent of the time when I appear at the time of the hearing and file my opposition, the judge has already read the moving papers and has no time to read the opposition. A good judge will take the time before taking the bench, but if he or she happens to be in trial, with jurors waiting in the hall, the opposition will never be read.
My latest ex parte application opposition involved a request for a TRO, seeking to restrain my client from all sorts of things. The case is a standard attempt to keep my client from competing with his former employer, by filing an action and then trying to poison my client as to future employers, while at the same time trying to intimidate him with discovery and ex parte applications.
The ex parte application for a TRO was a sight to behold, running 20 pages and supported by five declarations. I prepared an equally impressive opposition, refuting all the false claims made in the declarations, but I knew there was little or no chance of the court having the time to read my opposition in detail.
You have no doubt learned the wisdom of lots of headings to make your papers easy for the court to scan. I take this to the next level, and in cases such as this create a list with bullet points on the first page of the opposition, explaining why the application should be denied. I sometimes wonder if that is overkill, but this instance showed how effective that technique can be. The hearing was set for 8:30 a.m., and the doors did not open until that time. I checked in and filed my opposition with the court clerk. She turned to take the motion to the judge, and I saw that she met him in the corridor, preparing to enter the courtroom. As I watched, he flipped to the first page of my points and authorities where I had my list, took about 30 seconds to scan it, and then entered the courtroom and took the bench. He used my list as a checklist, asking opposing counsel to respond to each point.
Ex parte application denied.
In a recent trial where I was defending the tenant in a commercial lease dispute, I prepared a trial brief that began with the heading: “Here is how this court should resolve this matter, without the need for trial.”
The judge took the bench and began by stating, “Mr. Morris has proposed a way this matter might be resolved without the need for trial. Let’s explore that before we proceed.” With a minor change or two, the opposition agreed to my proposal and the matter was resolved before the trial. A complete home run for my client.
Be creative. Make life as easy as possible for the judge when you draft your papers, and you will have a far better shot at getting your argument in front of the court.
If You Lie Down With Dogs You Wake Up With Fleas
My book on starting your own firm is oh so close to publication, and a call from opposing counsel today reminded me of the ramifications of violating Rule 1 from that book. Rule 1 is a lesson they never teach in law school; one that many attorneys never learn. In civil litigation, no one is guaranteed representation. In our system of legal advocacy, someone may elect to represent the bad guy, but it doesn’t have to be you. Your practice will be infinitely more enjoyable if you know that all of your efforts are designed to do justice, not to defeat it. Don’t ever allow yourself to rationalize that a party has a “right” to an attorney. Only criminal defendants have such a right. Think of the esteem our profession would gain if parties with frivolous claims or defenses could not find an attorney willing to represent them.
Rule 1, therefore is simple: Only represent the right side of a case. If you are like a lot of attorneys I have discussed this with, your response might be, “how do I know which side is the right side?” In reality, knowing which side is the right side is hardly ever an issue, but if you need a little wiggle room, then make this your rule number 1: Never knowingly represent the wrong side.
Only representing the side of justice can be a difficult standard to maintain because of the temptation to give into the dark side of the force. You are having a slow month and a defendant comes to you shortly before his answer to the complaint is due, offering a nice retainer. He admits he owes the plaintiff the money in question, but there is at least a plausible claim that the plaintiff did not fully perform under the agreement. The client wants you to mount an aggressive legal defense so that the plaintiff will be more amenable to accepting less than the full amount he is owed. If nothing else, he adds, at least you will be buying him some time to get his finances in order.
The retainer would be nice and the “aggressive defense” demanded by the client would certainly translate to some significant fees during the representation. But ask yourself this: Do you really want to devote time to a case that has as its objective depriving a plaintiff of money that is legitimately owed to him? When your children, your spouse or your friends ask you about the case, will you be proud of the response you give? Read the rest of this entry »
Posted in Attorneys, Business, Rules for the Practice of Law, Starting Your Own Firm, Starting Your Own Law Firm, Your Own Law Firm | 
Tags: Attorney, defense, fraud | 
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Learning to Lose with Aplomb – Part Two
Jerry Sharp / Shutterstock.com
Think real hard before ever suing a client for unpaid attorney fees. Cross-complaints for malpractice are now so routine that some malpractice carriers exclude any malpractice claim flowing from a collection action. Remember, if your client owes you an amount sufficient that you would sue to recover it, then you are partly to blame for not getting sufficient funds up front. And as a corollary, if you do sue, you’ve got to know when to hold em, know when to fold em.
I previously wrote of an attorney named Jerry Albert, who was an Assistant U.S. Attorney. A case he was prosecuting was thrown out on a mistrial when the court decided he had mischaracterized the testimony of a witness. That would have meant little to me, because who is to say the judge was correct? Judges, quite understandably, are seldom as focused on the testimony as the attorney trying the case. On one occasion that I recall, the trial judge was absolutely convinced that the witness had not testified as I was claiming at a post trial motion, and opposing counsel kept chiming in, “that’s right judge, the witness never said that, the witness never said that.” I was about to lose the motion based on the judge’s recollection of what was said, but I managed to persuade him to have the reporter read back that portion of the testimony. The transcript confirmed what I was saying, and the judge conceded that he had completely missed that testimony during the trial.
But back to Jerry Albert. He and/or his office did not want his name mentioned in the appellate decision, and asked the court to refer to him only as “the prosecutor”. The appeallate court took umbrage with that request, and added to the opinion that prosecutors like Mr. Albert “should not be able to hide behind the shield of anonymity when they make serious mistakes.” Thus, in trying to keep the alleged mistake on the down low, the attorney only highlighted it, causing public comment like this one.
Now comes an attorney by the name of Steven J. Horn. As reported by the Metropolitan News-Enterprise, Mr. Horn represented the Hoffmans on a property line dispute. Horn did not win the case for his clients, but the Hoffmans appealed with another attorney, and won on appeal.
Horn retained attorney Frank Nemecek to sue the Hoffmans for unpaid attorney fees, and the Hoffmans counterclaimed, alleging that Horn had misrepresented his real estate experience and failed to timely tender a cross-complaint to the Hoffman’s homeowner’s insurer.
That dispute between Horn and the Hoffmans went all the way to trial, and in the end the jury awarded Horn a little over $42,000 in fees, but awarded the Hoffmans an identical amount on the counterclaim (don’t you just love juries?). According to the article, the trial judge viewed the judgment as a wash, and entered a “zero” judgment.
Strike one.
Oh, but we are a long way from the end of this train wreck of a story. Read the rest of this entry »
Don’t Be That Attorney – The Uncommitted Extortionist
I see this a lot in the wrongful termination context, and I even warn callers that they will likely encounter this type of attorney if they keep calling around. I call these attorneys “Uncommitted Extortionists”. The Uncommitted Extortionist is an attorney who will take any case on a contingency, hoping that he can make a quick score but knowing that he will kick the client to the curb if he can’t.
In today’s example, we represent a business client who is suing for Internet defamation. The defendant in this case has engaged in a form of Internet defamation that has become all the rage in Europe, and is now spreading to our shores. The defamer posts a really bad, false review about a business. Often the review will be about a restaurant, and the defamer will falsely claim that he got food poisoning from the food, and noticed cockroaches everywhere as he was leaving the restaurant. Those types of false reviews are commonplace here in America, but the difference is that they are usually published by an anonymous competitor, hoping to drive business away from the victim business to his business. The European twist is that the defamer makes the comments in order to extort money from the business. After the review appears, the defamer contacts the business and offers to take it down for a set price. A modern-day protection racket.
So, back to our case. Seeing that our client’s business was doing very well, the defendant posted scathing reviews on multiple websites, falsely claiming that he had a bad experience with our client, and then offered to take them down in exchange for money. We responded by suing him for defamation, and I was soon contacted by his attorney. In the worst case of posturing I have ever seen, the attorney claimed that not only was he going to defeat our defamation lawsuit by proving that the statements were true, he was going to cross-complain for damages arising from the business transaction he was complaining about. Never mind that the transaction was more than ten years ago, and even if the allegations were true, the statute of limitations had long since passed. He demanded $50,000 to forgo pursuing his lapsed action, and to take down the defamatory posts. We politely declined his offer.
True to his word, along with his answer came a cross-complaint, not suing for the alleged business transaction, but instead suing my client for abuse of process for suing his client – a clear SLAPP. I responded to the cross-complaint with an anti-SLAPP motion, and that generated another call from the attorney. His efforts for a quick settlement thwarted, he was calling to tell me he was subbing out of the case.
Hence the name, Uncommitted Extortionist. The attorney had no problem using the legal process to extort money based on a bogus claim, and he was even willing to invest the time to draft a (really bad) cross-complaint, but that was as far as he was willing to go. The effort having failed, he is unwilling to spend any more time on the extortion attempt. In the process, he has abandoned his client with an anti-SLAPP motion to oppose, which will result in significant attorney fees.
Don’t be that attorney.
From the Trenches – Genius Advocacy or Sleazy Tactics?
Just one in a series of sick attorneys.
I finally started a trial this week after the defendant had managed to continue it seven times and delay my client’s day in court for almost a year. Here is the technique he used, and while it is not something I would ever do, I must begrudgingly acknowledge his creativity.
The defendant is a doctor. His first attorney billed a bagillion hours at $500 per hour, until the Defendant could no longer keep up with the huge bills. That attorney brought a motion on the eve of trial to be relieved as counsel, alleging he was not being paid. I’ve seen a number of judges respond to such a request with “too bad, so sad”, but this judge took pity and let the attorney out of the case. Continuance number one, to give the defendant time to find new counsel.
The defendant then showed up on the eve of trial with a new attorney, who begged for more time to prepare. Continuance number two. He asked for four months, but we kept it to two months.
As the trial approached, we could not get the new counsel to cooperate in the pre-trial exchanges and the like. We found out why when he showed up and asked for another continuance. At the risk of sounding insensitive to his medical condition, his claim was amazing. He represented to the court that he suffers from a medical condition that requires medication, but that the medication makes him too loopy to prepare for trial. Therefore, since the court had only afforded a two month continuance, he had to go off the medicine in order to put his mind in a place where he could prepare for trial. But that then let his condition worsen, so now he could not proceed with trial. He had a doctor’s note in hand, attesting to the fact that he absolutely had to get back on the meds for a couple of months to get his condition back under control.
When it appeared that the judge was going to continue the matter again, we explained the obvious scenario opposing counsel was creating. If the medicine renders him unable to prepare for trial, then what good will it do to grant another two month continuance to let him go back on the meds if he will be unable to prepare for trial? The judge met us half way, and set a deadline for the ill attorney to do the pre-trial conference, and if he could not, defendant would have to find new counsel. Continuance number three.
That deadline came and went, so we went to court to explain what was going on, and new counsel appeared, asking for six months to prepare for the trial. (We must really intimidate opposing counsel, who feel that they need half a year to get ready to fight us in court on a case that prior counsel has already spent a year preparing.)
Anyway, the details are getting tedious, but the punch line is that this new attorney showed up on the trial date claiming he was too sick to go forward, and the trial was continued. This is pure speculation, but if I were the suspicious type, I would think that the defendant doctor, who had announced that he wanted to continue the trial as long as possible, was intentionally hiring attorneys with medical conditions in order to delay the trial.
[Update] From the standpoint of getting the matter continued, opposing counsel’s tactic of using a parade of sick attorneys was undeniably successful. However, at trial, we got a $1.6 million verdict against the defendant for sending a defamatory email, and it was apparent that the latest in the string of attorneys was not as prepared for the case as he could have been had he not been e pluribus unum. (To his credit, though, I was very impressed by how familiar he was with the case after coming in so late.)
So, bottom line, the tactic worked, but it may have come at a very high price.
Posted in Business, Income, Starting Your Own Firm, Starting Your Own Law Firm, Your Own Law Firm | Tags: Sick Attorneys, Trial Continuance | No Comments »
Think Twice Before You Send that Demand Letter Out of State
How Metabolic sees the case
The case of Metabolic Research, Inc. v. Scott J. Ferrell, et al. is turning out to be a fascinating case on several levels, including liability considerations for attorneys and SLAPP issues. Briefly, here are the facts as set forth in a recent opinion of the Ninth Circuit Court of Appeals.
Scott J. Ferrell is an attorney practicing in Orange County, California. He apparently believes that a supplement being made by Metabolic and sold by GNC (Stemulite) is bad stuff. To that end, he sent demand letters to Metabolic and GNC in Nevada and Pennsylvania, respectively, accusing them of violating the California Consumer Legal Remedies Act by way of false advertising, and threatening to sue them (presumably in California)* if they did not stop their (allegedly) evil ways and agree to an injunction to that effect.
In California, Ferrell’s letter would likely have been determined to be part of the litigation process and therefore protected, UNLESS it was deemed to be extortion. (See Flately v. Mauro.) In California, the issue would have proved very interesting, because while Ferrell was not demanding any money, the hallmark of true extortion, the injunction he was demanding was so onerous – including a requirement that all profits be disgorged – that Metabolic claimed it would have put it out of business. Nonetheless, in California it might have been decided that the letters did not cross the line, and Ferrell would have been safe from suit.
But Ferrell’s letters were sent outside of California. In November 2009 Metabolic filed a lawsuit in Nevada State Court against Ferrell, charging extortion and racketeering based on his demand letter. Ferrell removed the case to Federal Court (I never would have done that for the reasons that follow), and then brought a motion to dismiss based upon Nevada’s anti-SLAPP statute, claiming that the lawsuit amounted to a SLAPP because it was suing him for engaging in litigation.
Motion DENIED. The District Court found that “Nevada’s anti-SLAPP legislation only protected communications made directly to a governmental agency and did not protect a demand letter sent to a potential defendant in litigation.” Again, as would be appropriate in California but not necessarily elsewhere, Ferrell took an immediate appeal.
Appeal DENIED. Federal courts do not like interlocutory appeals, and will find a way to reject them. The court did an in-depth review of Nevada’s anti-SLAPP statute, and concluded there was no right of immediate review of a denial of an anti-SLAPP motion. The court referred to this as a “run of the mill anti-SLAPP motion” (ouch), and held that a District Court judge affords sufficient safeguards to protect defendants from SLAPP actions without the added protection of an immediate appeal. However, to twist the knife a little, the Ninth Circuit threw in that Ferrell could have proceeded by way of a writ of mandamus, and that it was offering “no opinion on how we might have decided” such an application had it been pursued.
Lesson 1: Consider that when you send a demand letter out of State, you may be subjecting yourself to an action in that jurisdiction.
Lesson 2: (And I have seen this over and over) Don’t remove a case to Federal court just because you can. The motion may well have been decided the same way in State court, but I think the odds would have been far better.
* That’s not me presuming, the court opinion used those words.
Posted in Business, Starting Your Own Firm, Starting Your Own Law Firm, Your Own Law Firm | Tags: Anti-SLAPP, Extortion, Motion, SLAPP, Starting Your Own Law Firm | No Comments »
